Discussion of Finance and Wall Street, and Dreaming of Pitchforks.

Category Archives: Too Big To Fail

It is difficult to talk about daily life without a sense of ourselves being the prey that Wall Street and the biggest corporations bred and held in captivity just like the rabbits of San Juan Island. The San Juan rabbits were originally introduced to the island for hunting, were at some point simply abandoned into the wild, and now have bred a little too successfully, which is a problem. They have few natural enemies other than Man, so Man seems justified in getting really nasty in its methods to get the little guys. I don’t want to dwell on those methods, because the sadness of rabbit death is a distraction from the other issues I should be focusing on.

Consumers as food.

We’re a rich nation. In order to participate in the social interaction present on the internet, interactive TV and movies, the viewer needs at least one of the expensive devices on which to watch, listen, post messages, click on opinion polls, vote for a favorite, etc. There are so many customers of new and wonderful products that the media treats these things as if everyone has them. Consumers thus are conditioned and bred to have heightened appetites for exciting goods and services. Even poor kids at Christmas want the best of computer games, XBox, Wii, MP3 players and the like, because they are well informed about such items and have been accustomed to think the average person should naturally have them — even when parents are unemployed or facing financial problems. That’s not the kids’ fault; it’s a rare child who fully grasps the financial circumstances of his family, and plenty of parents try to prevent their kids’ knowing how bad things are. The parents may go out begging from the public to try to meet their kids’ desires; generous people often help, by giving them some of those very expensive toys; the sad cycle continues. Those families are now being bred for the hunt. And that’s an extreme example. A lot of us are San Juan stock already, due to our wish to —

1. own a home and taking out too much credit, being deceived by our lenders, cheated by our lenders, or 2. own a smartphone, or3. own a computer tablet or one of the other wonderful devices which have now actually become a standard device for communicating, working, and the like. Yep, we’re rabbits on the run. Those devices alone, which we have learned to depend upon, incur more and more expense to keep running, to update, and so on. And don’t get me started about cable TV and how much it costs and how TV used to be free…

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And now, I want to say a word about a growing contagion:

The Big Banks have infected the supposedly “Good” Banks with their insidious fee practices. No bank is good anymore.

The HuffingtonPost and some other public-interest groups compiled a list of banks they considered relatively “good,” all over the nation. These banks had little or no exposure to the mortgage crisis, did not invest heavily in the biggest perpetrators of mortgage schemes, etc. The list included small and local banks in every state they could find, and the aim was to find safe and suitable places for middle class people to do their banking.Banks on this list are now participating in the egregious fees practices that the Big Banks do. For instance, at one unnamed bank, the new overdraft policies categorize consumer purchases in different ways, and by doing so, manage to charge fees on what the new federal legislation would otherwise prohibit charging a fee on.

The legislation says, generally, that each customer of the bank must be asked if he wants any purchase covered if it’s made without sufficient funds in the account. This is “opting in” to an overdraft — so if you try to use your check card in a store to buy an item, but your bank account doesn’t actually have enough, the purchase will go through but your bank will charge you a whopping fee, usually at least $25 and more often $35 or more. This overdraft protects you from inconvenience or embarrassment, but it’s terribly expensive.

If you do not tell your bank you want such protection, it will not cover the charge; your purchase simply gets declined, and nothing more happens. EXCEPT WHEN something more happens. Because they can categorize your purchases in different ways. Buying something in a store or online is considered a Point-of-Sale (POS) purchase, which requires your presence at the store, or your online confirmation of the purchase at the time it is being done. Well, there is another type of purchase, very, very common online: It’s the RecurringCharge. The subscription to an online magazine, or a dating membership, or movie service are all examples of this. This may be called something other than a POS charge by your bank, and they don’t have to decline, even when you didn’t opt in for overdrafts. They treat it as a special kind of purchase, as if it were a promissory note. Car payments and mortgage payments are often recurring charges and are important to cover. But a magazine subscription?? And it incurs fees when your account doesn’t have the money to cover it right there — Boy, does it incur fees.

Now, the fees. The bank in my example charges $36 for the first insufficient funds penalty. Then, if you don’t add some money to your account to take care of it, in a week you are charged another $36. Then soon, if you still haven’t covered it, you get charged $9 a day, every day you don’t add money to your account. A Netflix charge could cost you about $150 that month, if you forgot to make sure your account was completely funded.

Wall Street firms historically were the worst of the gamblers. We can now include the Big Banks in that group too. For example, Bank of America’s stock sank by about 40% over the last few months, but it has decided it loves its own sh– I mean, debt. BoA loves its own debt, and is thinking about watering down its stock to make more money so it can buy back its own debt. The said debt had gone through a lessening in value so it might be a bargain if they bought it back now. But why on earth would they want to? Because they’re Too Big To Fail?

The gambling banks really like to gamble. It’s a chance to stare death in the face, and a lot of them don’t seem to care if they win. They just want that encounter with death. There’s a poker player who comes to mind now: Eskimo Clark, a bracelet winner in the World Series of Poker some years back. He has been said to have had more than one stroke at the table, but refused to leave and give up his poker hand. A couple of years ago, the last WSOP I believe he competed in, he’d obviously had a medical emergency; he was falling out of his chair and had pissed himself. But he insisted he would continue playing. It seems he owed so much the only way he could pay it back was to end in the money somewhere in the event. Finally the tournament directors, or someone, called an ambulance and he was removed to a hospital.

A sickening story. When he first jumped into my thoughts, it was because of Bank of America’s doings. BoA was like the desperate poker player. But now maybe I think — we are Eskimo Clark. We have not yet removed ourselves from the table to get needed help. (No action from Congress, no Glass-Steagall reinstatement, no tax on financial transactions to cure the deficit, no jobs bill, no nothing.) What the hell are we doing here? Are we waiting to see what it would be like to die?

Now that Detroit has turned into Tom-All-Alone’s, and other Michigan cities are taking part in that Dickensian nightmare too, why don’t we just all sit back and read about Justin Bieber’s paternity suit and Kim Kardashian’s divorce?

Wall Street banks and the SEC officials pretending to regulate them may as well have had the colostomy bags ripped off them, shoved in their faces and told, “explain this!” — airport style. That’s the thought

The SEC, it seems, has been destroying the documents of a case anytime the matter or complaint does not become a full investigation. Called out on it, now they are trying to deny and cover up that they’ve been doing it.

Taibbi’s revelations are amazing since much of them relate to whistleblower Darcy Flynn, who still cannot speak to the press. Flynn is an SEC attorney who was appointed to oversee documents which, he discovered, are regularly destroyed at the SEC as soon as the case relating to them isn’t upgraded to a full investigation. The destruction of such preliminary documents happens to be illegal, but it had become standard procedure. Senator Charles Grassley is currently trying to get answers about it from them.

Preliminary investigations over the last few years, include such familiars as: Goldman Sachs, Bernie Madoff, JPMorgan, Lehman Brothers, AIG, Deutsche Bank. Most of whom received government bailout funds.

And just why did those in particular not get investigated, when as we know, criminal activity was definitely taking place then, and resulted in the “cratering” (Taibbi’s favorite verb) of the economy just a little later? That of course can be answered with a picture of a revolving door, with SEC top people leaving and going straight to their new, very-well-paying jobs at JPMorgan or another bank, while the just-resigned head of said bank goes to his new job at the SEC. A few years later they or other individuals at same banks trade places. The relationship between the SEC and the Big Banks is that of friends, mentors, and future employers.

It’s not just the evils of who in particular got elected last. It’s a deeply-rooted weed in our government which has been growing for almost 2 decades, the era of the too-big-to-fail Big Banks.

Bonuses on Wall Street are projected to be bigger than last year, again!

Why, that must mean the recession is over! We’re on our way to national prosperity again!

Yeah, yeah. And why don’t you look up EDARS, and think about those. We’re actually creating “commonsense solutions for the homeless, portable shelters which are private and sturdy.”

Larry Summers, you p.o.s., declaring that the recession was over, last year.

Warren Buffett, you p.o.s., declaring we “will not have any double-dip recession at all.” We’re in one now.

An opinion piece in The Nation is now calling for power to be given back to people and taken away from the big corporations. The editorial strongly suggests that not only shareholders but every single employee of a corporation be given the right to sue the corporate officers for looting the corporation — and he gives a couple of nice examples of what could rightfully be considered looting:— Granting big bonuses, or
— Giving big donations to political candidates.
While those are nice thoughts, why would anyone see the court system as a solution to the economic troubles of the country? It was the Supreme Court who decided corporations are people and should be allowed to give any amount of cash to political candidates; and just how long does he think anyone would remain an employee once he sued an officer of the corporation he works for?

Instead, can there be found ways of eliminating the bonus system entirely? Is there a way to change the present system, in which top executives work for short-term ultra-high gain of the corporation, in ways that endanger the company’s very existence, then they leave with their simply enormous golden parachutes?

Hey, we now know what the executives of corporations are capable of, remember? The last few years were a ripping off of the wool over our collective eyes. Because, when you shear sheep you naturally remove the wool from over their eyes.

So what can be done?

Ted Rall’s new book, The Anti-American Manifesto, is a desperate scream at us, the worried-but-inactive of this country. Just began reading this. The book is kind of a shocker, but perfectly normal for Rall. (A series of shocks is clearly necessary to galvanize any of us into action.) It deals with the entire loss of power by the populace in this nation, a national tragedy which encompasses war, profiteering, torture, theft by Bailout, the looting of the economy, the changes in the power structure in Washington, and the duping of the American people, who sit around in a medicated-like stupor at all of it.

One needs to read it.

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About a week ago, Ben Bernanke told the Financial Crisis Inquiry Commission that federal regulators should be ready to close down banks that, if beginning to fail, threaten the rest of the financial system.

Amazing. Bernanke finally taking a stand on Too-Big-to-Fail Banks, a stand that is apparently in OUR corner. It’s so weird to have him here! I picture him standing among us awkwardly in his nice suit, shuffling his feet, wondering when he can leave.

But I wonder:
Which TBTF Banks would — or could — be defined as failing, and which would be defined as a threat to the rest of the system? There’s the rub. The government, in its grand beautiful slowness, would take years deciding that a Bank should be closed. By then its damage will have been done.

Still, Bernanke’s saying this aloud “sends a message” (now there’s an abused, tortured phrase) to (our enemies) the Great Big Banks that maybe it’s time, finally, to start flying right and enact policies which don’t assume a Bailout is eternally there as a safety net. They will have to Stand Up so the federal government can Stand Down.

ISN’T it funny how our war verbiage is just like our financial verbiage?

Must be because of the class war we’re being forced to fight.

Strange also that Tim Geithner is lately making noises that sound like he wants to strengthen the economy, even at the expense of the Great Big Banks. And Nouriel Roubini uttered some praise of him. Odd, very odd. So odd that some (Ilargi, of theautomaticearth.blogspot.com, for example) think Roubini has gone sort of Hollywood and is no longer to be trusted.

The Great Big Banks’ behavior, over the last 2 years, resembles the behavior of a friend of mine, who will not take any action to solve her financial problems — why? Because she subscribes to Publisher’s Clearinghouse religiously, answering every mailing with a new subscription to something and of course a contest entry — therefore, she sort of assumes she’ll be winning someday. I mean, after all! She’s been with them for so long! It is impossible for her to imagine anything else. She never thinks the unthinkable will occur.

The unthinkable? Hah. It happens every day, there are books written about it.

Wall Street is doing the same old thing in the same old ways. The Big Banks too big to fail are even bigger, the whole system still depends upon big growth to survive (Expand or Die), bonuses are still the way of the world on the Street, and credit default swaps are still okay to transact, when they should have been outlawed.

It is to weep.

Lately I’ve been thinking about Bernie’s houses. There is no public photo of his current home, but here’s a picture of his next-to-last pad. (Well, I am trying to upload it.)

How low he must feel now. It’s only when these guys are in jail that they have to live the life of shame. I think they’re inured to public shame except when it’s physical. I don’t really think the stockade should be brought back or anything, just incarceration. That’s quite good. It combines a yucky lifestyle with ostracism. And nonviolent punishment notwithstanding, It is time to raise a glass to the man who punched Richard Fuld!

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I get a bad case of the grippe — maybe it’s swine grippe — whenever I attempt to make a list of shocking things that Wall Street, Big Banks, and the financial corporations have done. It’s too long a list, for one thing, to make, and I keep getting sidetracked by despair at each successive entry.

But in every aspect of our lives horrible and perhaps unimaginable practices exist, and persist, and most of us don’t know about them. For instance, bear farms in Asia torture bears — keeping them for lifetime in tiny cages, milking them of bile which is used in marketed products. Some of the cages are so small the bear does not grow, but acquires a stunted body shape. Sounds unearthly and unbelievable. Happens, however.

Dogs are crammed together in cages for market in the various countries which sell them for food; people here are crammed together in sports arenas to wait out floods without working plumbing, air conditioning, or enough food. People wait on rooftops to be rescued days later in same flood. Presidents fly over the city from the safety of their big planes, simply watching. Other presidents declare ketchup a food which may be given to poor children in lieu of other vegetables. A presidential candidate assigns vice-pres. position to a brain-dead woman. No, it wasn’t Terry Schiavo, but may as well have been. Unimaginable practices, they abound in America.

Citigroup helped foreigners evade U.S. withholding taxes on stock market income and has to pay just $600,000 as a fine. I wonder how much tax revenue was lost by their strategy. They are undeterred by these minor penalties; this is demonstrated by the fact that in years up to and including 2006, Citi had to pay $26 million in fines for doing it. Clearly they’d rather pay the fines than follow the law. Same sh–t. Different day.

T-Mobile now charges you for sending you a telephone bill.

Wells Fargo charges you an overdraft fee on a check if you happened to write on it a date in which you didn’t have enough to cover it — no matter when you actually submitted the check. They actually investigate each one, in case they can find this discrepency and charge you a fee.

And then there’s gold. There is something weird and smelly to this fever for gold of the past two years. I thought it would slow down soon. But now that the mall near me has a large store devoted to buying your gold scrap, with large gold letters painted on its glass declaring that it will be happy to take your old gold teeth, among other things, I guess it’s going to be that way for a while.

Arch conservatives in particular think we should be back on the gold standard. How ridiculous. As if the big banks would even want this. They’re too happy making fake profits out of thin air, screwing up the accountancy, to want to have their debits and credits measured out in anything tangible.

And gold is too important, in itself, to be completely backing national currency all over the world. It’s great with electricity. Gold is the element which enables our computers to work. It conducts magnificently and nothing else works quite like gold. There just isn’t enough of it to use industrially AND to lock away in dungeons as currency. We don’t lock away corn or wheat or steel just to keep and look at once in a while, do we? (Or do we?…)

I wish to God that the Obama administration would listen to Paul Krugman and his ilk. Even Ted Rall, that angry volcano, refers to Krugman when discussing the right ideas the government should have acted upon — for instance concerning the bailout and then the stimulus: Both say that Obama should have spent the bailout on homeowners to prevent them from going delinquent on loans, and the stimulus should have gone much farther and mirrored the Public Works Program of FDR. And by the way, I am not interested in the Rall’s past sex life and so will not be buying his latest book. Only the previous ones.

The Rall. He’s rather amazing but I wouldn’t want to meet him. Well, maybe in a large room a good distance away. I’d far rather meet Paul Krugman.

Bonuses on Wall Street aren’t addressed specifically on webcomic Wigu.com, but the storyline of the site does follow a fantasy of mine about staging a revolution against the present order. There’s a little yellow guy in a red cape named Topato, who sails into the castle and tells the princess, “We’re overthrowing your father’s offensively incorrect idea of a democratic government, my lady. The rule of Law must be allowed to change with the times.”

Right out of my own fantasy mouth! And Topato’s friend, co-leader of the revolution Sheriff Pony, says: “Princess Dongle, by removing your father from power we will be on the path to an equal society. No longer shall a minuscule elite class prey mercilessly upon a lackadaisical, overmedicated working class.”

Then Topato says: “It’s revolution o’clock…”

I consider them both holy men.

I admit I overly enjoy several internet comics. Like Goats.com. According to Goats, when you do something impossible, like invert so you’re sucked into your own personal black hole, thus entering a different universe consisting only of yourself, what is left in this universe is: a Pop Tart. Either that or a kitten, since apparently they’re equivalent.

But in this world, as we’ve seen, the U.S. government intervenes when it feels like it. Otherwise, AIG would now exist as a Pop Tart. (Or kitten.)

And the lots of many car dealerships would be rustling and meowing with — kittens!

When we turn on TV, we’d get back-to-back-to-back commercials for toaster pastries during Bones and 30 Rock instead of ads for Jeeps, Fords, and other pieces of doomed metal.

When Barney Frank opens his mouth to tell us how he’s protecting us in the overseeing of the bailout money, out will fall — a kitten!

Tim Geithner, when he gets hungry during meetings, will have no worries, because his pockets will miraculously be full of Toaster Strudels. (Which will make him very sticky. If he seems reluctant to shake hands, you’ll understand why.)

Eric Cantor will open his box of Lipton teabags to hand some out to his friends but will find only crushed crumbs of strawberry-frosted toaster pastries, mixed with kitten hairs.

We are not speaking of simple moneylending, which Shylock engaged in. I never saw any proof that Shylock charged an unreasonable interest. He just had to find some sort of career out of the usual since he was a Jew and not allowed to own land.

We are referring to interest that is above and beyond what humans should be paying, charging usurious rates of interest on money lent. The notion of creating wealth for yourself from thin air this way disgusted our forefathers. They had respect for manual work, for craftsmanship, for farming, etc. They did not care, on the other hand, for people who found ways of getting the fruit of others’ labor through capitalizing.

Dante put Usurers in the same circle of Hell as sodomites and others who engaged in “unnatural practices.” Labor was “natural,” lending was not. The Roman Catholic Church considered it unearned income. So society was fairly prejudiced against lending to begin with; but as soon as economies began becoming more sophisticated (which happened in the Stone Age) it became a necesssary part of the whole. What was considered too high an interest to charge, then?

In past centuries, 10 percent often used to be a sort of cutoff. I don’t think it’s related to titheing. It’s just a number. For instance, British government in 1545 used to penalize lenders trying to charge more than that.

And today, ten percent seems to echo in many quarters, still, as an upper limit on consumer personal loans, but if you check laws for your state, they actually go all over the board. Some states don’t seem to even have a cap. And exceptions apply all over. Speaking of lending laws, why don’t credit cards fall under these laws completely? If the federal law states that a company may charge fees that are “legal” in the particular state the customer is in, how does it happen that I have the rates I do? Why are late payment penalties considered the same as interest and in what calculator does the penalty for a late $1 charge become $29 and still remain a legal percentage of the original charge? So a rate of 2900% is legal in my state? In any state??

Pardon. I seem to be foaming at the mouth.

Ah, Capital One. Ah, BOA, ah Wells Fargo. If only we were free to change the terms of our contract with you at any time, as you are. We would cut our rates by 5 percentage points; forgive ourselves for, say, 2 late payments per year; eliminate monthly or yearly membership fees and replace them with a single joining fee. That seems fair. And for your past practices, we grant ourselves the right to walk up to you in the street and slap you in the face once without legal repercussions, or key your cars once, or merely harmlessly spit on you each and every time we see you.

Now, that’s what I call a contract. And it’s social!

I wouldn’t feel so strongly if we were also able to earn similar interest in your banks when you use our money, you see. Why is it okay for banks and other lenders to charge these incredible percentages but no ordinary customer can get anything like that in any sort of savings instrument? Savings accounts, money market accounts yields have fallen to one-half, one, or perhaps two percent in most cases.

I am waiting to hear what happens with the bill Chris Dodd has gotten past committee in the Senate, which at least halts the hikes in rates on credit cards “at any time, for any reason” but feel sure that the CC companies will do what they can to FIND reasons.

Tomorrow among other things I might ponder the phone companies. The execs of those certainly get a lot of pay bonuses. And I will be annoying.